Econometrica: Sep 2004, Volume 72, Issue 5

Likelihood Estimation and Inference in a Class of Nonregular Econometric Models
p. 1445-1480

Victor Chernozhukov, Han Hong

We study inference in structural models with a jump in the conditional density, where location and size of the jump are described by regression curves. Two prominent examples are auction models, where the bid density jumps from zero to a positive value at the lowest cost, and equilibrium job‐search models, where the wage density jumps from one positive level to another at the reservation wage. General inference in such models remained a long‐standing, unresolved problem, primarily due to nonregularities and computational difficulties caused by discontinuous likelihood functions.

Log In To View Full Content